The Supreme Court has extended its interim order banning mining and transportation of iron ore by OMC, owned by Karnataka's Reddy brothers

The Supreme Court on Thursday extended its interim order banning mining and transportation of iron ore by Obulapuram Mining Company (OMC), owned by Karnataka's Reddy brothers in Anantapur district of Andhra Pradesh (AP), reports PTI.

However, the apex court referred the matter back to the AP High Court, asking it to take a decision expeditiously.

The order to this effect was passed by a bench headed by Chief Justice KG Balakrishnan after OMC and the AP government consented to the suggestion made by the bench in this regard.

The apex court said that the AP government will file its response within a week before the High Court. It also asked the parties to the dispute to appear before the High Court, which has posted the matter for hearing on 18th January.

The AP High Court had stayed the government order of the AP government, restraining the company from carrying out mining activities in the area on the basis of the report of the apex court-appointed Central Empowered Committee (CEC).

The AP government had challenged the High Court order in the Supreme Court. The apex court also gave opportunity to the CEC to appear before the High Court.

The CEC was constituted by the Supreme Court to inquire into the matter based on a writ petition filed by Tapal Ganesh of Bellary against OMC over alleged illegal mining activity in violation of the Forest Conservation Act, 1980.

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SEBI's move to scrap entry loads on mutual funds may have been well intentioned, but it tripped badly in failing to assess the ground realities and the consequences of its actions

Five months after the Securities and Exchange Board of India (SEBI) scrapped entry loads on mutual fund (MF) schemes, the industry continues to be on the decline with further ill-conceived band-aid like trading through stock exchanges failing to attract investors. In the five months after the SEBI move, Rs7,200 crore of funds have moved out of equity schemes and flown, almost entirely, to Unit Linked Insurance Plans (ULIPs).

SEBI's move may have been well intentioned, but it tripped badly in failing to assess the ground realities and the consequences of its actions. It failed to visualise that sharply higher commissions paid by the insurance industry will suck money out of MFs. It also failed to ensure the availability of inexpensive alternative distribution channels. Consequently, investors continue to pay commissions, but only to other intermediaries such as banks or others in the exchange traded system. The question is, when will the regulator admit its mistake and initiate corrective action?

If SEBI had attempted to seek feedback before bringing in the regulation, it would have highlighted the impact of a hasty scrapping of entry loads on the fund industry and cautioned it against blundering ahead. A report by McKinsey & Co, the leading global consultancy firm, had enumerated some key issues even in August 2009, when the SEBI order came into effect. Even then, the fund industry was in turmoil and assets under management (AUM), which had been growing at 50% on a year-on-year basis, had declined by a sharp 17%.

McKinsey had pointed out that bank and national distributors who have control over the "customer's wallet" would be in a position to charge. That is exactly what is happening today. Banks were blamed for extorting huge paybacks from Asset Management Companies (AMCs), they have smoothly switched to debiting customer accounts for advisory fees.

McKinsey had also said that AMCs would have to continue compensating distributors (mainly banks) from their reduced fees. They may also increase exit loads for customers across holding periods—but this would be restricted to 100 bps. Here is what else McKinsey had predicted for the industry.

• Higher exit loads and transparent commissions would reduce the propensity to churn investments.
• Portfolio management services and alternate products will grow faster. AMCs and distributors will push higher margin products, especially debt products. This has indeed played out as predicted.
• The industry will undergo consolidation since smaller AMCs would find it difficult to manage the stress on their finances. Entry barriers will increase and it may even be difficult for new schemes to find distribution partners. However, the fact that SEBI has over 12 to 14 pending applications seems to suggest that the financial sector is not giving up on the mutual fund industry as yet.
• Most pertinently, the report had pointed out that it is IFAs (independent financial advisors) who help in geographic penetration of financial products. With IFAs, especially the smaller ones losing the incentive to sell mutual funds, the geographic penetration of the industry was bound to slow down. McKinsey's data shows that beyond the top eight cities, IFAs are the dominant distribution channel accounting for just under 50% of the market.

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COMMENTS

MANAV

7 years ago

Dear Mr KANNAN,it is surprising to know that you alone knew that Mr Debashis Baru of moneylife was in panel of SEBI-and he recommened scrapping of entry load-do u belong to GOBBELS ministry of diinformation?how did u dare to make such allegation for some one who is fighting so hard for the cause of truth-r u not reading articles time to time pubslihed in this web magazine?peole like GOBBELS OF HITLER made so many announcements of HITLERS victory in world war 2-but the fact today is well known today-same will be fate of this TUGHLAKI FARMAN in near future-

Santanu

7 years ago

Great Debate, Interesting reading. However now that the whole thing has happened one needs to look forward to how do distributors big and small survive? I dont think only the small guys are loosing AUM so are the big guys particularly the ones not servicing clients properly or entirely honestly.

However I do feel instead of abolishing the entry load entirely a variable entry load would have been a better option to start with as most investors do not really like the idea of paying fees.

Also I feel by making the MFs available through the exchange one is not exactly targetting the ideal set of investors. A direct equity investor particularly a short term trader and the dealer of a broking house isn't the perfect set of people to appreciate a long term savings product like MFs. Both are looking for short term gains

sucheta

7 years ago

Where does Mr. Kannan come from? Why not start reading Moneylife regularly before commenting. We have written several articles and written them repeatedly about SEBI's half-witted actions without ever consulting the ultimate target -- the investor.
If you want to talk about TRPs why not spend time on those channels who are getting crores of rupees of advertising channeled through exchanges to support the regulator?
Or come clean about your agenda... you seem an interested party.

MLD

7 years ago

Dear Kannan,
1. It is a lie that entry load was scrapped by panel
2. It is a lie that a panel \"recommended\" scrapping of entry load
3. It is a lie that there was a panel AT ALL
4. It is a lie that Mr Basu was a member of ANY panel that recommended scrapping entry load
5. Blaming the media is convenient but STILL a lie.
6. For your education, only two organisations are to be blamed for the debacle: SEBI and AMFI
7. It Moneylife ALONE among the media that has said that entry load should not have been scrapped without a debate.
1. Mutal Fund turmoil: Can SEBI be held accountable?http://www.moneylife.in/article/8/3204.html
2. http://www.moneylife.in/article/81/2799.html

Kannan

7 years ago

In the first place, all media including MONEYLIFE is responsible for this current debacle in MF. Moneylife's editor Debashi Basu was on the panel which recommended scrapping of entry load.

At the end, you blame SEBI alone for not taking adequate precautions. I feel the decision taken by SEBI is a collective one. If Moneylife disagreed with scrapping entryload was done in haste, Debashi basu could have resigned out of the SEBI Advisory commitee. Did he do it?

For obvious TRP rating, the media has been reporting biazed views. And moneylife is one among them.

Also, currently there is lot of confusion between ULIPs & MFs and many distributors are interchanging both...

MFs are a transparent business unlike ULIPs...

Do you think SEBI knows about ULIPs, but why is it not doing anything about it....

It has be something, you tell me!!!

MANAV

7 years ago

U R RIGHT Mr BP SINGH-SEBI HAS STARTED ACTING AS DICTATOR WITH FOOLISH THOUGHTS-IT HAS NO IDEA THAT WITHOUT INCENTIVE NON OF FINANCIAL PRODUCTS R SOLD-HAS SEBI THOUGHT TO ABOLISH BROKERAGE FROM BOLT-BY DIRECTLY FACILITATING INVESTORS TO TRADE?THEN Y ONLY NO ENTRY LOAD IN MUTUAL FUNDS?IF IT REALLY WANTS TO SAFEGUARD INTERESTS OF INVESTORS=THEN FIRST IT SHOULD ABOLISH BROKERAGE OF BOLT BROKERS AND GIVE FACILITY OF DIRECT TRADING FROM INVESTORS OWN ACCOUNT.

B.P.Singh

7 years ago

TUGHLAKI FARMANS ,must be rectified, even Mohd.-been-Tughlak did it by reverting his capital back to Delhi. Its now SEBI(modern Tughlaks),they must revert their decision, if not in the interest of IFAs ,atleast then to save the MF industry.

ashok yadav

7 years ago

dear readers
it has been noticed that in a country like india people are not feeling comfortable paying advisory fees to the ifa's. sebi could have thought in a humanitarian manner that they are closing the way for livelihood of so many ifa's and trying to create business volume for big giants in the industry..
i appreciate the forum for the efforts in the matter. thanks. regards.
ashok yadav

RUPESH

7 years ago

SEBI ABOLISHED ENTRY LOAD GIVING REASON FOR CHURNING OF SAME MONEY-BUT WHO SAYS-IFA'S WERE RESPONSIBLE FOR THAT-IT IS SEBI ITSELF RESPONSIBLE WHICH GAVE FREE HAND PERMISSION TO LAUNCH NFO'S WITHOUT ANY RESTRICTIONS-AND IT WERE AMC'S WHO LAUNCHED MONTHLY NFO'S,HOW ONLY IFA'S TO BE HELD RESPONSIBLE-IF SEBI WANTED BENIFIT TO INVESTORS-IT SHOULD HAVE ALLOWED ONLY YEARLY ONE OR TWO NFOS'S PER AMC-THIS IS SAME THAT IFA'S HAVE BEEN MADE ''BALI KA BAKRA''

RUPESH

7 years ago

SEBI HAS DONE SO MANY FATAL MISTAKES IN PAST-LIKE COMPULSION OF PAN CARD IN SIP-THEN IT REVERSED THE SAME DECISION-IS THAT THE THOUGHTFULNESS OF SO CALLED INTELLIGENT GUYS SITTING IN SEBI-THE DECISSION TO ABOLISH ENTRY LOAD WAS UNNECESSARY AS 2 ROUTES IE DIRECT OR THROUGH BROKER WAS PREVALANT-ALSO BOLT FAVCILITY DID NOT WORK-IT FAILED TOTALLY-THESE ALL CONSEQUENCES SHOWS THAT SEBI HAS MADE ALL THIS WITH MERE INTENTION OF KICKING OUT IFA'S FROM THIS BUSINESS FOR BENIFIT OF STOCK MARKET BROKERS.

vaibhav

7 years ago

Your argument is somewhat "Bad practices yield more investment so lets keep it". I have been benefited, my colleagues have been benefited and many more because of SEBI. Your article answers the complaint itself by saying that there are many of applications for MF. Its a money minting business for big firms by essentially doing nothing. So your arguments are moot, that they are losing. Ultimately industry will consolidate, investor will become more wise. But for the sake of ill informed investors the bad practices of strong hand firms shouldn't continue. And SEBI ultimately is for saving interest of investors and not the firms and funds. I think SEBI has been successfully doing it.

Stock exchange traded MF has turned out not successful not because of SEBI but the extremely high cost to investor. I am very sure if those costs would go down it will definitely be on level playing field with any of the current distributor system.

Excellent and opt observation, Sucheta! What is the problem in first taking a feed back from all stakeholders through web?

Besides these 17,500 towers, Aircel has also committed additional 20,000 tower sites to GTL Infrastructure over the next three years

Telecom tower company GTL Infrastructure Ltd said on Thursday that it will acquire 17,500 telecom towers of mobile service provider Aircel Ltd for about Rs8,400 crore.

GTL's group company GTL Infrastructure's board of directors at their meeting held today approved the purchase of tower assets from Aircel and its group subsidiaries through a special purpose vehicle (SPV), GTL said in a filing to the Bombay Stock Exchange.

"The SPV has entered into a business transfer agreement with Aircel for acquiring the said tower portfolio," the company said.

Aircel has committed an additional 20,000 tower sites to GTL Infrastructure over the next three years, it added. The transaction is likely to result in a significantly higher revenue opportunity for GTL Infrastructure in the range of Rs8,500-Rs17,000 crore over the next five years.

Of the total equity funding of Rs3,400 crore for the buyout, GTL Infrastructure would contribute up to Rs1,750 crore, while GTL would invest Rs1,500 crore in the SPV.

Commenting on the deal, Maulik Patel, head-research, Kisan Ratilal (KR) Choksey Shares and Securities Pvt Ltd, said, "For 100% stake GTL Infra will be required to pay about Rs8,500 crore and it will stretch its balance sheet. We expect GTL to dilute their equity base by about 40%-50% and acquisition to be funded (at a) debt/equity ratio of 2.5x."

With this acquisition, GTL will have more than 31,000 towers and will become one of the largest independent telecom tower providers in the country.

GTL offers its expertise in wireless communications from 2G networks to 3G and 4G, from WiMAX to IPTV.

It has a network of over 23,700 towers and with this acquisition, it is slated to be one of the largest telecom infrastructure providers in the country.

GTL had earlier said that it was planning to erect, engineer and manage 1,00,000 cell sites across 150 networks, enabling mobile connectivity to over 100 million subscribers in 50 countries.

Aircel, a unit of Malaysia's Maxis Communication, has about 38,000 towers, of which nearly 17,000 are owned by the company. Maxis Communications holds 74% stake in Chennai-based Aircel.

With the acquisition, GTL Infrastructure would reap more benefit as mobile operators are leasing out tower infrastructure instead of setting them up themselves to control costs.